Wal-Mart: 'On the Side of the Angels'

CEO Lee Scott talks about going green, aiming for the affluent, battling opponents, and what it's like to be a major issue in the 2008 Presidential campaign

You would think from reading the headlines that being chief executive of Wal-Mart Stores (WMT) would be a pretty tough job these days. Workers grumble about pay and benefits. Union groups wage ongoing campaigns against your company. Cities and towns try to stop you from putting up new stores. And the Democratic candidates for the 2008 presidential nomination have decided that hammering your company for the next year and a half could be a pretty good way to get votes (see BusinessWeek.com, 11/16/06, "Can Barack Wake Up Wal-Mart?").

But Lee Scott, Wal-Mart's CEO, isn't distracted by headlines. During a lunch with BusinessWeek editors and reporters, he made it clear that he's too focused on the retailing business to be bothered much by bad press. He's outspoken about the criticism of Wal-Mart, attributing it mostly to union groups that are worried about their own futures. But he said the evidence is clear that Wal-Mart has a huge number of supporters: the country's largest retailer pulled in $345 billion in revenues last year.

In a wide-ranging interview, he covered many of the company's challenges and successes. He acknowledged that the company's pursuit of more affluent shoppers, particularly in apparel, was "too far, too fast." And he said opposition in some cities was preventing the company from opening up certain stores. Yet he sees plenty of promise ahead for the company in international markets and green products.

What follows are edited excerpts of the conversation.

Scott: I've been directed to be not quite as provocative as I was yesterday [at the New York Times (NYT), which ran a story titled "Wal-Mart Chief Writes Off New York."]

Since we all read about it this morning, what is your view about New York?

Well, what I was thinking was, we were sitting in New York City, in Manhattan, talking about stores. It's not something I brought up, [but] I said, I don't care if we ever have a store here. From that then came the story that we don't want a story in New York City, which then implies that we don't want stores in the boroughs. Obviously, we do want stores at some point in the boroughs. Whether we even get them, we'd like them. That's how that occurred.

Mona Williams (spokeswoman for Wal-Mart): You were expressing your opinion but you're just one vote in the process to determine where we put our stores.

Scott: Once a month on Mondays, the first Monday of the month, we go to a real estate meeting and these young people stand in front and they post on the board. It's done electronically, but a city, the trade area, the number of stores in the area, the income level of the people, and all of those things. It takes about five minutes, and then we vote on the stores. I don't pick the store sites, I don't pick the towns we go to, I have a part in that process. But anyway, I think people in New York are sensitive when you say you don't want to be here.

What is you next big push in the area of sustainability and the environment?

We were in Secaucus in the morning, walking through the store, and the department manager in hardware had to show that his compact fluorescents are outselling his incandescent bulbs 4 or 5 to 1—it might even be more than that. That is a very small part of our business, but on the other hand at a big company you need something that manifests the effort so that people can get their minds around it.

We have a lot we're doing in packaging—it's one of the big efforts; it's both the quantity of packaging and the type of packaging. We have a lot at the store level about energy usage that our people are very encouraged about and feel very confident that the stores this year and next year can be at least 25% more energy-efficient than the stores we have opened previously. And that they can get their goal of a 50% energy savings over, I think, the next 3 to 5 years. I'm not as confident but they made a presentation the other day that was very compelling.

So you have all those things that are happening in a very serious way. And there is also this step of trying to figure out the carbon footprint of what we sell. And then working with our suppliers to help them reduce that carbon footprint.

I heard about your molecules memo—the chemical concern of the week or month.

Well, there are things like pacifiers or chew toys for children that in other countries they don't have those chemicals in them. And they've been banned in other countries; they're not banned here. Why wait until something is done about that? It's cost-neutral, so why not just do the right thing and get it done?

Those are the kind of things we're working on. We're not squeezing suppliers. We are asking suppliers.

How does that work?

We bring them in and we very nicely talk to them about what it is we're trying to accomplish, what they are doing in their company. P&G [Procter & Gamble (PG)] is already doing a lot of work with cold-water Tide, and they're doing a lot of work in concentrating the soap to a third of the size it was. It will take a third of the transportation costs, a third of the packaging.